AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of December 28, 2004 (this ?Agreement?), is entered into by and among People?s Choice Home Loan, Inc., a Wyoming corporation (?PCHLI?), People?s Choice Merger Sub, Inc., a Wyoming Corporation (?Merger Sub?), People?s Choice Financial Corporation, a Maryland corporation (?PCFC?), and 1-2-3 Mortgage, LLC, a Wyoming limited liability company (?1-2-3 Mortgage?).

RECITALS

WHEREAS, 1-2-3 Mortgage is the sole stockholder of PCHLI;

WHEREAS, PCHLI is the sole stockholder of PCFC;

WHEREAS, PCFC is the sole stockholder of Merger Sub;

WHEREAS, the respective Boards of Directors and sole stockholders of PCHLI, PCFC and Merger Sub believe that it is in the best interests of PCHLI, PCFC and Merger Sub and their respective sole stockholders that Merger Sub be merged with and into PCHLI under and pursuant to the provisions of this Agreement and the Wyoming Business Corporation Act, as amended (the ?WBCA?); and

WHEREAS, the respective Boards of Directors and sole stockholders of PCHLI, PCFC and Merger Sub have approved this Agreement and the transactions contemplated hereby.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows:

1. Merger. Upon the terms and subject to the conditions set forth in this Agreement, Merger Sub shall be merged with and into PCHLI (the ?Merger?). The Merger shall be consummated by filing with the Wyoming Secretary of State properly executed articles of merger in such form as is required by the relevant provisions of the WBCA (the ?Articles of Merger?), together with such other documents as may be required by the WBCA. The Merger shall become effective upon the effective time of filing the Articles of Merger with the Wyoming Secretary of State (the time the Merger becomes effective being hereinafter referred to as the ?Effective Time? and the date on which the Effective Time occurs being hereinafter referred to as the ?Effective Date?).

2. Effects of Merger. The Merger shall have the effects set forth in this Agreement and Section 17-16-1106 of the WBCA.

3. Surviving Corporation. Following the Effective Time, the separate corporate existence of Merger Sub shall cease and PCHLI shall be the surviving corporation resulting from the Merger (the ?Surviving Corporation?) and shall succeed to and assume the rights and obligations of Merger Sub in accordance with applicable law.

4. Articles of Incorporation. At the Effective Time, the Articles of Incorporation of the Surviving Corporation shall be amended to be identical to the Articles of Incorporation of Merger Sub until thereafter amended in accordance with applicable law.

5. Bylaws. At the Effective Time, the Bylaws of the Surviving Corporation shall be amended to be identical to the Bylaws of Merger Sub until thereafter amended as provided therein or by applicable law.

6. Board of Directors and Officers.

(a) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation following the Effective Time, and those persons shall serve as directors until their respective successors are duly elected or appointed and qualified in the manner provided in the Articles of Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided by the applicable provisions of the WBCA.

(b) The officers of PCHLI immediately prior to the Effective Time shall be the officers of the Surviving Corporation following the Effective Time, and those persons shall serve in their offices until their respective successors are duly elected or appointed and qualified in the manner provided in the Articles of Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided by law.

7. Conversion of Merger Sub?s Outstanding Common Stock. At the Effective Time, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any further action, be converted to one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.

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